Crude oil jumps over 3% as Middle East tensions escalate

Oil prices jumped more than 3% on Monday after Iran launched missiles at Israel, raising fears of a wider regional conflict and renewed disruption to energy supplies. The gains came despite an OPEC+ decision to increase production quotas for July.

Oil markets opened sharply higher after Iran launched ballistic missiles at Israel on Sunday, marking the first direct attack since a ceasefire between the two countries took effect in April.

Brent crude rose more than 3% to above $96 a barrel, while U.S. benchmark West Texas Intermediate climbed past $93 a barrel.

Traders reacted to concerns that the latest escalation could derail diplomatic efforts and prolong disruptions to global energy flows.

Although Israeli authorities said all incoming missiles were intercepted and no casualties were reported, investors remained focused on the risk of a broader conflict.

Ceasefire under pressure

The missile strike came hours after Israel carried out an air raid in Beirut targeting what it described as a Hezbollah command centre.

Iran had warned it would respond if Beirut was attacked. Israel later launched strikes against military targets in western and central Iran, further raising tensions in the region.

The exchange has placed new strain on a fragile ceasefire and cast doubt on efforts to stabilize the situation after months of conflict.

Hormuz concerns dominate market outlook

Analysts say the market's main concern remains the Strait of Hormuz, a critical shipping route for global oil supplies.

Recent diplomatic efforts had raised hopes that the waterway could reopen fully, easing pressure on physical oil markets. However, renewed hostilities have increased fears that supply disruptions could persist.

Market observers warn that a breakdown in negotiations could send oil prices significantly higher as traders struggle to replace barrels affected by the disruption.

OPEC+ boosts output, but impact seen as limited

Separately, OPEC+ ministers agreed to raise production quotas by 188,000 barrels per day in July.

The increase, approved during a virtual meeting of key producers including Saudi Arabia and Russia, is similar to hikes announced in recent months and is intended to support market stability.

However, analysts said the move is unlikely to offset concerns about supply risks stemming from the Middle East conflict.

"The market is not short of quota announcements; it is short of physical barrels that can actually move," said Jorge Leon of Rystad Energy.

Diplomacy faces critical test

U.S. President Donald Trump sought to reassure markets, insisting that diplomatic efforts remain on track and urging restraint from both sides.

But with military exchanges continuing and uncertainty surrounding negotiations, investors are watching closely for signs of either de-escalation or a broader regional confrontation.

For now, the oil market remains caught between hopes for diplomacy and fears that the conflict could trigger a deeper supply crisis.